The Schaller Law Firm is an aggressive litigation-minded firm that prides itself on aggressively defending mortgagees to protect their mortgage investments from lien stripping attacks in bankruptcy cases. The Schaller Law Firm aggressively defends mortgagees to ensure mortgagees have the best opportunity to save their mortgage investments and collect future mortgage payments on performing loans and collect future foreclosure-sale proceeds on non-performing loans.

Sunday, February 7, 2010

I was shocked at what I observed on January 29, 2010 in the US Bankruptcy Court for the Northern District of Illinois (Joliet, IL, Judge Barbosa presiding on behalf of Judge Black). I witnessed a debtor stripping and avoiding a junior mortgage lien under the following circumstances:

1. the junior lien holder failed to appear;
2. the junior lien holder failed to oppose the motion to strip and avoid the lien on procedural grounds that such a result can only be achieved via an adversary proceeding;
3. the junior lien holder effectively waived its right to an adversary proceeding;
4. the junor lien holder failed to contest the debtor's assertion that the junior mortgage was wholly unsecured and offered no evidence whatsoever as to the value of property;
5. the junor lien holder failed to offer any evidence as to the true fair market value of the property by admitting into evidence its own appraisal;
6. the junior lien holder allowed the debtor to establish the fair market value of the property by merely asserting the debtor's self-serving "belief" as to the value.

Debtor offered no appraisal. Debtor offered no broker's opinion. Debtor merely asserted what it believed was the true value. Debtor's counsel utilized debtor's assertion on Schedule A of the bankruptcy schedules to establish the fair market value of the property.

As a result, the bankruptcy court granted the motion to strip and avoid the lien. The junior mortgagee lost without a fight in a case I believe could have been won.

It's time for junior mortgagees to fight the ever-increasing lien stripping attacks. Lien stripping attacks are going to accelerate. It's time for the junior lien holders to start defending themselves aggressively.

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